occurrences
On November 28, 2023, the company issued the FY2024H1 performance announcement. During the reporting period, the company achieved operating income of 886 million yuan (+14.9%); achieved net profit of 6.23 million, and successfully turned a loss into a profit during the reporting period; EBITDA 145 million yuan (+134.4%); adjusted net profit of 44.707 million (+319.0%); adjusted net profit margin of 5.1%. Business operations continued to improve, and profitability increased steadily.
Comment:
Losses were successfully reversed during the reporting period, and an increase in profitability can be expected
The company's FY2024H1 successfully reversed losses. The net interest/adjusted net interest rate was 0.7%/5.1% respectively, and the gross margin was 22.89% (21.67% in the same period last year). The increase in the company's revenue during the reporting period was mainly due to business recovery after the COVID-19 pandemic and an increase in the number of patients received. The increase in gross profit was mainly due to increased revenue and improved operating efficiency.
Dual brands stabilize operating pipelines and steadily expand stores
During the reporting period, the company opened 1 new dental hospital and 1 clinic (41 dental chairs in total), and upgraded 6 dental clinics (the number of dental chairs increased from 46 to 73). As of September 30, 2023, the company had 123 stores in 15 cities in China, including 113 dental clinics and 10 dental hospitals, and 959 senior dentists (914 at the end of FY23). By brand, the company has 50 Ruitai clinics, 10 Ruitai hospitals, and 63 Ruitai clinics.
Endogeny and epitaxial are developing simultaneously, and acquisitions are continuing
In September 2023, the company acquired 85% of Guangzhou Ruihua Dental Clinic at a price of RMB 017 million. It has about 20 full-time doctors, and the company's business map has further expanded.
Investment advice: Maintaining a “buy” rating
The company is a national chain of dental medical service institutions with a unique business model. Endogenesis and epitaxial development are developing simultaneously, and the profit inflection point was ushered in fiscal year 24. We expect the 2024-2026 fiscal year to achieve total operating income of 18.39/22.75/2,798 billion yuan, +25%/24%/23% year-on-year; achieve net profit of 34/118/157 million yuan, +115%/251%/33% over the same period; of these, FY2024's adjusted net profit is expected to reach about 95 million yuan (considering RSU expenses); maintaining a “buy” rating.
Risk warning
Foreign exchange risk; policy change risk; regional operation risk; risk of increased industry competition.